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dam-l LS: Pak Mool cost more than it's worth
Pak Mool cost more than it's worth
EARLIER this year, the World Commission on
Dams (WCD) published its performance review
of Thailand's most controversial hydro scheme,
the World Bank-financed Pak Mool dam,
confirming what observers have long
suspected: The project is an economic failure
and a growing financial liability to Thailand's
electricity ratepayers.
A central question now, and one that the WCD
sidesteps: Is it even worth operating the dam
for electricity production? Or, would electricity
ratepayers - not to mention the dam's countless
victims - be better off if the dam's turbines were
shut down and the gates opened so that fish
could return to the Mool River?
As part of the commission's global review of
dams, the study found that the 136-megawatt
Pak Mool dam is barely generating 40
megawatts in the high-demand months of April
and May.
Even in the rainy season, when water levels are
very high, the dam's owner, the Electricity
Generating Authority of Thailand (Egat), has to
shut the power plant down because there isn't
enough head to drive the turbines.
Completed in 1994, the dam cost US$233
million (Bt8.85 billion), almost twice as much as
originally estimated. Today it isn't generating
enough electricity to recover its investment
costs. The dam was supposed to have a return
on investment of 12 per cent, but the actual
return is closer to 4 per cent, WCD reports.
As for irrigation - Egat initially claimed that the
dam's reservoir could irrigate up to 25,000
hectares of farmland in the dry season - the
WCD found that the dam is useless, its "actual
benefits are zero".
Meanwhile, the cost of maintenance, mitigating
damage to fisheries, and compensation
awarded to people suffering economic losses
keeps going up. The WCD study found that "the
total annual income from fisheries over the
long-term is worth more than the cash and
credit compensation" provided to affected
households by Egat. Efforts to mitigate
damages to fisheries haven't succeeded and,
as a result, the government is "saddled with
ever-increasing claims for compensation".
Had Egat done an honest cost-benefit
calculation, based on the dam's actual benefits
and costs, the WCD concludes "it is unlikely
that the project would have been built".
The extent of the utility's financial miscalculation
is evident in the full report that was produced for
the WCD by the Bangkok-based Thai
Development Research Institute. For example,
if the Pak Mool dam's dependable capacity is
16 MW, as cited by the institute, the dam
earned an average of about $7 million in the
last two years.
This figure could be even lower still, depending
on when the dam generates electricity. As a
rule, power produced during the daily four-hour
peak demand period is worth more than power
produced during the night, but the development
institute couldn't do this calculation for Pak
Mool because Egat refused to disclose
time-of-day production data.
Assuming the dam generates $7 million
annually over its 25-year life, then its present
worth is only $56 million. For Pak Mool to be a
viable investment, it would have had to
generate $28 million (12 per cent of $233
million) annually in electricity sales. As it is,
Egat has lost $177 million on its investment.
Put another way, Egat has spent roughly four
times more on the Pak Mool dam than it can
ever earn in electricity sales.
This "stranded cost" of $177 million will likely
get passed on to electricity ratepayers in the
form of a special charge on their electricity bill,
regardless of whether the dam continues to
operate or not.
If the dam is kept in operation, Egat will also
have to pay the rising cost of maintenance and
long-term compensation for damages.
Thousands of uncompensated families would
continue to face economic hardship, even
hunger and malnutrition, having lost their daily
source of food and income.
Fish migrations would stay blocked and, with
every passing year, the potential for recovering
the river's fish species and habitat would
diminish.
A decision to shut down the turbines and open
the gates, on the other hand, would spare
ratepayers the dam's future operating
expenses as well as the cost of unpaid
compensation provided that fisheries and
fishing livelihoods are restored.
The idea isn't as radical as some people might
think. A growing number of uneconomic dams
are successfully retired each year in North
America, in order to restore once-productive
fisheries and revitalise local economies.
Now that the WDC has exposed Pak Mool as a
money-losing and unreliable power provider,
people harmed by the dam are owed a fair
chance at economic recovery.
GRÁINNE RYDER investigates the impact of
aid-financed development projects with
Canada's Probe International. Wayne White is
a US-based power and infrastructure
economist.
BY GRÁINNE RYDER and
WAYNE WHITE.
LAST MODIFIED: Friday, 09-Jun-00 12:07:01
EDT
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Aviva Imhof
South-East Asia Campaigner
International Rivers Network
1847 Berkeley Way, Berkeley CA 94703 USA
Tel: + 1 510 848 1155 (ext. 312), Fax: + 1 510 848 1008
Email: aviva@irn.org, Web: http://www.irn.org
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